When the Corporation Has Both Preferred and Common Stock,the Steps

question 22

Multiple Choice

When the corporation has both preferred and common stock,the steps to compute book value for common stock would be:

• A)compute common shares divided by number of shares outstanding.
• B)compute preferred stock book value first;the remainder is assigned to common stock.
• C)divide total stockholders' equity by total shares outstanding.
• D)None of these answers is correct.

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Definitions:

Sharpe Measure

A calculation used to understand the return of an investment compared to its risk, defined by the difference between the returns of the investment and the risk-free return, divided by the standard deviation of the investment returns.

Information Ratio

Ratio of alpha to the standard deviation of diversifiable risk.

Active Portfolio

A portfolio management strategy where an investment manager makes specific investments with the goal of outperforming an investment benchmark index.

Nonsystematic Variance

The portion of an investment's variance that is due to factors specific to the individual investment, rather than factors affecting the entire market.